A Big Lizard sells a call and a put at the same strike, then buys a higher-strike call. It combines a Short Straddle with protection against a large rise. The short put still exposes the position to a substantial loss if the stock falls.
Names and related structures: ATM straddle with a protective higher-strike call.
Market Outlook
The best expiration outcome is at the shared short strike. A rise can also remain profitable when the opening credit exceeds the width of the Bear Call Spread. This condition must be checked from the actual premiums; buying the call alone does not guarantee a profitable upside tail.
Position Construction
Sell one $100 put, sell one $100 call and buy one $105 call, all with the same expiration.
| Action | Option | Expiration | Premium |
|---|---|---|---|
| Sell 1 | $100 put | Same expiry | $4 |
| Sell 1 | $100 call | Same expiry | $4 |
| Buy 1 | $105 call | Same expiry | $2 |
Example
With XYZ at $100, the two sales collect $8 and the purchased call costs $2 per share. Net credit is $6, or $600 for one position. At $100 all options expire worthless and the credit is retained. At $105 or above, the call spread costs $500 to close or settle, leaving $100 profit. At $90, the short put loses $1,000 before the credit, for a $400 net loss.
All amounts use a 100-unit contract multiplier and exclude commissions and fees. These prices illustrate the arithmetic; they are not current market quotes.
Payoff Diagram
| Underlying price | Expiration P/L |
|---|---|
| $0 | −$9,400 |
| $90 | −$400 |
| $94 | $0 |
| $100 | $600 |
| $105 | $100 |
| $120 | $100 |
Maximum Profit
Maximum profit is the $600 credit, earned at the $100 short strike at expiration.
Maximum Loss
For this stock-option example, maximum loss is ($100 − $6) × 100 = $9,400 if the stock reaches zero. Above $105 the result is a $100 profit. In general the downside loss is short put strike minus credit, multiplied by the contract size; also compare any call-spread loss when credit is smaller than its width.
Breakeven Point(s)
The example breaks even at $100 − $6 = $94. If credit is smaller than the call-spread width, an upper breakeven also occurs at the short call strike plus credit.
Big Lizard vs Jade Lizard
The Jade Lizard separates the short put and short call strikes. The Big Lizard brings them together, replacing a flat maximum-profit interval with a single peak. Neither removes the short put’s downside exposure.
Risks and Position Management
A small credit does not make the downside exposure small. Short options can be assigned early, and holding an assigned stock position changes the exposure. Margin and cash needed for assignment are separate from this payoff. Check all three bid–ask spreads and the cost of exiting the trade.
Before expiration, option prices also reflect time remaining and volatility. The expiration diagram does not show every interim gain or loss. Trading costs reduce profits and increase losses. Review the contract’s exercise and settlement rules before trading.
Explore the Position
Related Strategies
Structure reference: Strategy reference. Example premiums and calculations are illustrative. Editorial standards.